The "Chip Act" was introduced: the United States made a desperate bet, and China's semiconductor industry accelerated Mercedes-Benz

Reporter | Peng Xin

Edit | Wen Shuqi

The global division of labor and cooperation in the chip industry will be artificially reversed.

On August 9, the Chip and Science Act, which had been circling for more than a year, was signed and passed by US President Joe Biden. Under the bill, the U.S. government will provide $52.7 billion in financial assistance to support semiconductor manufacturers in research and development and production in the United States, while restricting subsidized companies from expanding production capacity in China.

The chip bill is symbolically significant, and its core purpose is to bring high-end chip manufacturing and technology back to the United States.

Intel CEO Henry Kissinger commented that the chip bill may be the most important industrial policy introduced by the United States since World War II, aiming to reverse the trend of the United States' share of the global chip manufacturing industry falling from 38% in 1990 to 10%. AMD CEO Su Zifeng believes that the bill is a revolution for the U.S. semiconductor research, development and manufacturing ecosystem.

However, for the overall development of the global semiconductor industry, the introduction of the bill is undoubtedly a step backwards. It will disturb the original division of labor in the industrial chain, artificially raise the operating costs of the global global semiconductor industry, and it is difficult to predict how effective it will eventually be.

America's "Desperate Bet"

Under the Chip Act, the U.S. will set up four major funds of $52.7 billion for chip manufacturing, defense chips, chip technology security, and innovation. The "U.S. Chip Fund," which is involved in chip manufacturing, is a top priority, amounting to $50 billion. Of that, $39 billion is spent on chip production, including $2 billion specifically subsidizing traditional chip production; Another $11 billion will be used to subsidize chip research and development, including the National Semiconductor Technology Center (NSTC), the National Advanced Packaging Manufacturing Program, and other research and development and workforce development programs.

However, the industry generally believes that it is difficult to reverse the decline of the US chip manufacturing industry in the short term. The asset-heavy nature of wafer foundry makes it require more capital investment, and wafer foundry is more energy and human resources. Although the 50 billion fund looks very large, it is actually only a drop in the bucket compared with the total investment in the chip industry. For example, TSMC's capital expenditure reached $40 billion a year, and even if it goes to the United States to build a factory, subsidies are not the most core factor.

Moreover, the U.S. road to re-industrialization and the return of manufacturing is extremely difficult. This not only stems from the industrial structure of the United States, but also because the existing globalization has evolved into a containing force in the United States, and the United States is accustomed to the existing "outsourcing-import" globalization, and has formed a path dependence, and the return of manufacturing is obviously contrary to globalization.

This has also been mentioned by Zhang Zhongmou, founder of TSMC. The advantage of Taiwan in wafer manufacturing is that there are a large number of excellent and dedicated engineers, technicians and operators, and they are willing to devote themselves to manufacturing. Although the United States has a large number of talents who design chips, it is quite lacking in the manpower to manufacture chips, and it is difficult to have excellent engineers who are willing to devote themselves to manufacturing. The second is the geographical location of Taiwan and the industrial clusters formed in Hsinchu, Taichung and Tainan, which the United States cannot match.

He also believes that the United States wants to increase the production of domestic chips is an expensive, wasteful and futile move.

Compared with East Asia, the United States has high labor and manufacturing costs, which means that the United States may not be suitable for making chips in the first place. In addition, according to the Associated Press, the chip bill will cause the U.S. federal government deficit to increase by $79 billion over the next decade.

There are also oppositions to the bill in the United States. Bernie Sanders, a non-partisan U.S. lawmaker, has criticized chip bills as "blank checks" for businesses, and that in the short term, chip bills cannot have a significant impact on industry. It will still take years for companies to build new factories and facilities to address chip shortages and increase the independence of production.

Bernie Sanders also said, "The total profit of the five major fabs in the United States last year was as high as $70 billion, why does the government still subsidize such enterprises?" "Rebuilding chip companies in the United States is actually looting taxpayers' money." ”

Disrupt global supply chains

In addition to incentives, the chip bill also contains content aimed at China. One of the provisions of the bill states that companies that receive federal funding are prohibited from significantly increasing production of advanced process chips in China for a period of ten years, and companies that violate the ban or fail to correct this violation may need to refund the federal government's subsidies in full.

The United States' attempt to use domestic politics to shape a new "window of opportunity" and globalization that is conducive to the growth of U.S. national interests and competitiveness is actually a retrogression of globalization and is not in line with the long-term interests of multinational corporations and the United States. Wang Yingliang, a doctoral student at the Center for American Studies at Fudan University, said in an interview with Interface News.

In the process of the rapid development of the semiconductor industry, the global division of labor is indispensable. However, a series of anti-globalization practices in the United States began to add additional burdens to the industrial chain.

According to estimates from the Semiconductor Association and the Boston Consulting Group, the U.S. would have to spend at least $1 trillion in front-end investments to try to build a fully self-sufficient local supply chain, which would also lead to an increase in operating costs of $45 billion to $125 billion per year for the entire semiconductor industry to potentially change the face of the global semiconductor supply chain.

For multinational semiconductor companies, how to ensure the supply chain under the new situation has become a problem that must be considered, and diversified operations have become an important option. It is not easy to build a new factory, and the attitude of local governments to the industry, the international situation, etc., are all factors that must be considered when setting up a factory.

In this regard, Wang Yingliang explained that on the one hand, the subsidy policy of the United States will of course attract some enterprises to invest in the United States; But on the other hand, any company will carefully design its investment path in the United States, minimize sunk costs, and consider expanding incremental interests in the United States while taking into account the interests of existing stock investments. It's a fairly complex process of weighing the pros and cons.

Among the major semiconductor giants, Samsung and SK Hynix, two major Korean companies, are quite embarrassed. Semiconductor equipment production giants Samsung Electronics and SK Hynix have been working in the Chinese market for many years. Public data shows that in the total semiconductor sales of Samsung Electronics and SK Hynix, sales to China account for more than 30%; At the same time, the two companies also operate a number of semiconductor chip production and processing plants in China. If you want to get subsidies, the expansion of Samsung and SK Hynix in China and the promotion of advanced processes will be affected.

It is worth noting that at present, Southeast Asian countries such as Singapore and Malaysia are seizing the opportunity to develop the semiconductor industry. Singapore is actively attracting highly automated factories, including semiconductors, by providing support measures such as tax breaks, research collaborations, and subsidies for worker training.

Singaporean officials say it focuses on manufacturing chips and aircraft avionics, which require advanced machines and highly educated technicians. At present, GF and UMC, two major semiconductor manufacturers, are investing US$4 billion and US$5 billion respectively to build new fabs in Singapore. In May, TSMC intended to spend billions of dollars to set up a new 12-inch fab in Singapore, setting up a production line for 7nm to 28nm processes.

Hong Weisheng, executive director of the Singapore Semiconductor Industry Association, told Lianhe Zaobao that Sino-US competition, the Russian-Ukrainian war and the new crown epidemic continue to interfere with the global semiconductor supply chain, and companies must continue to self-assess and strengthen resilience to cope with risks.

In response to the introduction of the US chip law, Hong Weisheng believes that this will not affect the plans of multinational companies to expand in Singapore and the region. According to the Singapore Semiconductor Industry Association, semiconductors, as the fastest growing segment of Singapore's electronics sector, will increase their output value by 30% annually in 2021.

Malaysia is also accelerating its layout in the semiconductor sector to attract foreign investment. The chip industry accounts for about 6.8% of Malaysia's GDP and employs around 575,000 people. Globally, Malaysia accounts for 7% of semiconductor trade and 13% of global packaging and testing capacity.

In 2021, the country approved new investment projects for multinational microelectronics companies totaling RM95 billion (about 143.6 billion yuan). In the first half of 2022, 25 new semiconductor industry chain related projects were approved, with a total investment of RM9.2 billion (about 13.9 billion yuan), including amD, Texas Instruments and ROHM and other well-known enterprises.

"Asia's largest market in China, Singapore and Malaysia are relatively neutral markets and important transit markets in the world, the special position makes multinational companies can attack, retreat and defend, in fact, support and trust the Chinese market." Wang Yingliang believes that in the future, Singapore and Malaysia will be an important peripheral for China, and for the United States, it will be an important member of the Indo-Pacific economic framework, and it will also gather future competition between China and the United States.

China's semiconductor industry, accelerating Mercedes-Benz

Debon Securities believes that the US chip bill is expected to increase the attention of governments to the semiconductor industry, which may promote other countries and regions to promote the introduction of semiconductor-related stimulus policies.

For example, the European Union is seeking more than $40 billion in public and private semiconductor investment; Japan will spend about $6 billion and aims to double its chip revenue by the end of the century; Taiwan, on the other hand, has about 150 government-funded chip production projects that actively promote the localization of semiconductor equipment.

Wang Yingliang said that the passage of the US chip bill still shows a typical zero-sum game color, but in turn, this will also prompt China to take the road of independent innovation more firmly.

In the past Chinese mainland although the semiconductor industry has developed rapidly, the weaknesses have existed for a long time, especially in chip manufacturing.

Tianfeng Securities pointed out that at present, there is a serious mismatch in the output value of continental wafer foundry companies and local design companies. Limitations are mainly reflected in two aspects: from the perspective of production capacity, the phenomenon of "two ends outside" is serious, the local wafer manufacturing foundry does OEM work for foreign design companies, and domestic design companies also rely on overseas foundries to manufacture chips, wafer foundry processes, domestic wafer foundries are difficult to meet the needs of domestic design companies for mainstream processes (16nm and below) and high-performance simulation processes; From the process side, TSMC, the world's leading company, has marched to 5 nanometers. In contrast to Intel and Samsung, SMIC, which represents the most advanced level in the mainland, is mass-producing 14 nanometers. Among them, there is a gap of 2-3 technical generations with overseas giants, which is converted into nearly 5 years.

The introduction of the US chip law will in turn force China to enhance its autonomy in semiconductor manufacturing and accelerate the import and verification progress of Chinese-made equipment and materials for wafer manufacturing.

In fact, since the ZTE and Huawei incidents, under the pressure of a series of sanctions in the United States, Chinese chip companies have generally been prepared, and enterprises have emphasized autonomy in supply chain management and actively sought localization.

A number of domestic chip start-up practitioners told the interface news reporter that it was extremely difficult for domestic chip companies to break into the application of final customers, and there has been a turnaround in recent years.

"The key now is to develop a truly usable chip, if you can come up with a chip product, whether it is based on localization requirements, or based on supply chain security considerations, customers will be more willing than ever to verify and test the chip, as soon as possible to help the product to achieve commercialization." Some chip practitioners said, "This is a very important change. ”